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Can Balkan authorities afford to subsidise renewable energy?

In 2009, 62% of newly installed electricity generation capacity in the EU was from renewable sources, mainly wind and solar (a total of 17 GW). Wind-focused companies experienced more challenging environment; solar- focused companies appear to have turned the corner.

3.
“Assumptions”to regulate – “to control an activity, process, or industryofficially by using rules”a regulator – “a person or organization whose job is to becertain that companies, systems, etc. act fairly and followrules”to overregulate - to make too many laws and rules thatcontrol an activity, especially a type of business or industry (Source: Macmillan Dictionary)

5.
European legislation & recent changes (1/4)• 2009/28/ЕС – RES Directive (20/20/20) – (14) “The main purpose of mandatory national targets is to provide certainty for investors and to encourage continuous development of technologies which generate energy from all types of renewable sources.” – Article 2, k) “„support scheme‟ means any instrument, scheme or mechanism applied by a Member State or a group of Member States, that promotes the use of energy from renewable sources by reducing the cost of that energy, increasing the price at which it can be sold, or increasing, by means of a renewable energy obligation or otherwise, the volume of such energy purchased.”

6.
European legislation & recent changes (2/4)• 2009/72/ЕС – Electricity Market Directive (3rd Package) – (6) “A well-functioning internal market in electricity should provide producers with the appropriate incentives for investing in new power generation, including in electricity from renewable energy sources, paying special attention to the most isolated countries and regions in the Community‟s energy market.” – Article 25, 4. “A Member State may require the distribution system operator, when dispatching generating installations, to give priority to generating installations using renewable energy sources or waste or producing combined heat and power…”

7.
European legislation & recent changes (3/4)• COM(2010) 639 – “Energy 2020. A strategy for competitive, sustainable and secure energy” (November 10, 2010) – “…The move towards renewable energy use and greater energy efficiency in transport is happening too slowly…” – “…The optimum energy mix, including the swift development of renewables, needs a continental market at least. Energy is the market sector where the greatest economic efficiencies can be made on a pan-European scale…”

8.
European legislation & recent changes (4/4)• COM(2010) 677 – “Energy infrastructure priorities for 2020 and beyond” (November 17, 2010) – “…The grids must also be urgently extended and upgraded to foster market integration and maintain the existing levels of systems security, but especially to transport and balance electricity generated from renewable sources…” – “…At the same time the grids must also become smarter. Reaching the EUs 2020 energy efficiency and renewable targets will not be possible without more innovation and intelligence in the networks at both transmission and distribution level…”

10.
Bulgarian legislation & recent changes (2/7) What is missing• National RES Action Plan (published in mid-2010) “an overview of necessary grid expansion – Followed the Energy Strategy, but measures in the German power grid” preceded the RES law – Defines distribution of RES types in the coming 10 years, according to the ? national target – 16% in 2020 – Smart Grids and Electric Vehicles support schemes envisaged – Downside: non-consensual document, based on one-by-one talks and comments – Environmental impact consultations are being conducted now – Review by the European Commission Source: Germany‟s RES Action Plan

11.
Bulgarian legislation & recent changes (3/7)• Electricity Trading Rules (active since August 2010) – Art. 63 (3)&(5): Public Provider and End Suppliers may take responsibility for balancing of RES over 30 kW and make additional contracts with them for balancing mechanisms – Art. 70 (2)&(3): Generators send day-ahead schedules to the TSO (ESO) until 10:30am; RES generators send day-ahead schedules until 12:30pm – Art. 198: All RES generators with capacity >30 kW are members of a special RES balancing group with a coordinator, appointed by the energy regulator (DKEVR/SEWRC) – Art. 199: All RES (>30 kW) should send to the coordinator of the balancing group annual (for each of the 12 months), monthly (for each week), weekly (for each day) and daily (for the hours in the next day) forecasts of their production; the coordinator has to send aggregated information to the TSO

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Bulgarian legislation & recent changes (4/7)• Electricity Trading Rules (continued) – Art. 200 (2): The coordinator of the special RES balancing group may waive the obligation for balancing of capacities over 30 kW, but in this case the coordinator is responsible for balancing – Art. 203: RES capacities will not be punished financially for deviations, which are up to 20%; However, if deviations are higher than 20% and if they are contributing to the balancing group’s total deviation, RES producers will pay 50% of the balancing price that the group will pay to the TSO RES producer Balancing group RES producer Balancing group >20% shortage shortage >20% surplus shortage 50% of TSO balancing price No payment to the balancing group

13.
Bulgarian legislation & recent changes (5/7)• The effects of the new Balancing Group rules – Better than old balancing rules – Setbacks related to individual balancing (and scheduling) of RES, forecasts are complicated for single generators – New expenses for RES producers (not included in the calculation of current Feed-in Tariffs) – Serving as a deterrent for fast growth of RES in Bulgaria, contradicting to principles in RES law, energy strategy, RES Action Plan, etc.

15.
Bulgarian legislation & recent changes (7/7)• Bulgarian Law for Renewable Energy – Approved RES investors will receive a fixed feed-in tariff which will not be diminished during the period of the long-term contract – Wind capacities – with a 12-year PPA – Hydro (<10 MW) & other RES – with a 15-year PPA – Solar, geothermal & biomass capacities – with a 20-year PPA – A new Agency for Sustainable Energy Development will issue RES certificates (up to now issued by energy regulator); the agency will form from the basis of the current Energy Efficiency Agency

17.
Some aspects that are still not clear• Long-term (10y, 15y, 20y, etc.) forecasts for the electricity demand in Bulgaria• Unclear effect of carbon prices on the price of energy from Negative effects: fossil fuels - Unpredictable environment• Electric vehicles – still not - Higher risk for investments considered in national demand - Bad allocation of RES types forecasts - Higher costs for society -…• Many questions related to the realization of big energy projects• The effects of energy efficiency measures may vary greatly

18.
Thesis, Antithesis, and SynthesisThesis:“Bulgarian energy and RES markets are over-regulated, whichtakes them far away from market principles.”Antithesis:“Market principles will not be able to replace heavyadministrative regulatory rules by a magic wand and at once.”Synthesis:“Normal levels of regulation and real market conditions can beachieved step-by-step, but only if the steps are in the rightdirection.”

23.
Towards common RES regulation“…guaranteed payments have become more or lessharmonised in the different jurisdictions without regulativeinterference from the EU…”Source: the study “Comparative study on the main renewable energysupport mechanisms in European jurisdictions” conducted by CMSCameron McKenna LLP (http://bit.ly/RES-support)._______________• An additional incentive for common EU RES supportschemes – transfer of RES obligations from “leaders” to“followers” (and the 90 EUR/MWh fine for non-compliance)